India's Auto Ancillary Sector: A High-Growth Bet Amid Robust Industry Demand

India's auto ancillary sector is undergoing a transformative phase, driven by a confluence of domestic demand, policy tailwinds, and global manufacturing shifts. With a projected growth rate of 7–10% in FY2025 and a turnover of $80.2 billion, the sector is now a cornerstone of the nation's industrial strategy according to the report. As electric vehicle (EV) adoption accelerates and the Production-Linked Incentive (PLI) scheme fuels capacity expansion, companies like Schaeffler India are emerging as strategic players in this high-growth ecosystem.

A Sector on the Rise: Policy and Market Synergies

The Indian auto ancillary industry's ascent is underpinned by two critical factors: favorable government policies and a structural shift toward EVs. The PLI scheme, which allocates USD 10 billion over five years for auto component makers, has incentivized localization and R&D investments. Simultaneously, the sector's contribution to GDP is expected to rise to 5–7% in the coming years, with a long-term valuation target of USD 220 billion. Open FDI policies allowing 100% foreign ownership have further attracted global automakers, who have collectively invested $37.21 billion in India since 2000.

Schaeffler India: Financial Resilience and Strategic Agility

Schaeffler India's Q3 2025 performance underscores its strong positioning in this dynamic market. The company reported revenue of INR 23,601 million, a 13.9% year-on-year increase, with profit before tax (PBT) rising 23.9% to INR 4,129 million. For the nine-month period, revenue grew 12.7% to INR 67,523 million. This financial resilience is attributed to robust demand for transmission and braking systems, driven by a 4.2% rise, in passenger vehicle production and a 10.9% surge in commercial vehicle output.

The company's strategic investments further solidify its competitive edge. Schaeffler India plans to invest ₹4,500 crore to enhance manufacturing capabilities and localize production. Already, it has achieved a 79% localization ratio, supported by a ₹1,700 crore investment in the past three years. The Bangalore R&D center, now staffed with 910 engineers, is pivotal to its e-mobility roadmap, including a phased localization strategy for e-axles supplied to Tata Motors for the Harrier EV.

Aligning with Sector Trends: EVs and PLI Participation

While Schaeffler India's direct participation in the PLI scheme remains unspecified, the company's strategic alignment with sector trends positions it to benefit indirectly. Its focus on e-mobility-evidenced by the e-axle contract with Tata Motors and R&D expansion-mirrors the global shift toward EVs according to market analysis. Additionally, the PLI scheme's emphasis on localization complements Schaeffler's existing efforts to increase local content in bearings and other components.

The broader EV market's growth trajectory also bodes well for Schaeffler. For instance, the European EV busbar market's projected expansion by 2034 highlights the rising demand for efficient power distribution systems-a domain where Schaeffler's expertise in precision engineering could translate into opportunities.

Conclusion: A Strategic Bet for the Future

India's auto ancillary sector is no longer a supporting act but a global spotlight player. For investors, Schaeffler India represents a compelling case study of a company leveraging policy momentum, financial discipline, and strategic foresight. With a clear focus on EVs, localization, and R&D, it is well-positioned to capitalize on the sector's USD 220 billion valuation target. As the PLI scheme and domestic demand continue to drive growth, Schaeffler India's investments today are likely to yield outsized returns tomorrow.